By Filipe PachecoRaising funds has never been easy for Brazilian enterprises. With interest rates typically above 7 percent, borrowing money in Latin America’s biggest economy has always been difficult so an increasing number of IT firms are pushing headlong into the Brazil stock market – gaining big cash infusions through initial public offerings.
Companies like Senior Solutions and Linx have already turned to the stock market to raise money. BRQ, a well-known IT firm whose President, Benjamin Quadros, has been interviewed by Nearshore Americas, is gearing up to follow in their footstep.
Linx is a management software provider (ERP and POS) with more than 30 years of history and a strong presence in the Brazilian retail industry. With more than 1,500 contributors and over 12,500 clients, Linx has been focused on growing a presence within Brazil. Its clients include Luigi Bertolli, Walmart, Hering, Richards, Magazine Luiza, Lojas Americanas, KFC and Mega Matte, just to mention a few.
Over the past four years, Linx has acquired 10 smaller competitors, such as Quadrant, CSI, Inter Commerce and Formata. In February, Linx raised US$ 265 million offering around 20 million stocks on the stock market.
“We understand that, with the IPO, Linx will have more resources to carry on with its development plans and expansion programs,” said Dennis Herszkowicz, vice president and investors relations manager at Linx.
According to Herszkowicz, Linx took four years to lay the groundwork for the IPO. Before the IPO, Linx received capital injection from BNDESPar (which is the private equity branch of the local national development bank) and General Atlantic, an American private equity fund. “Our governance level was already quite high,” Herszkowicz said. “From the operational point of view, we had to do our homework. In the past two years, we have established an organizational structure to reflect a company that has multiplied its revenue several times in a short period of time,” he said.
Acquiring and Going Public
For the short and medium term, Herszkowicz says, the company will stay focused on the domestic market. Linx, he says, may expand overseas if it finds good business opportunity. He refused to be drawn on future acquisitions, nor did he name the companies his firm is in talk with. “Remember, we have made 13 acquisitions in the past five years,” he said.
Another Brazilian company to turn to the stock market for raising money is Senior Solutions. One month after Linx entered the stock market, Senior Solutions floated its share. Though the company is relatively small in size, it raised US$ 31 million through its IPO.
On the day of its public offering, company’s CEO Bernardo Gomes stated that his company had proved that even small companies could raise money on the stock market. “We are the proof that the stock market is there for us as well. Yes, we can,” he told the local media.
Senior Solutions is a 16- year-old company focused on offering IT services to Brazil’s financial services industry. The company claims to have 10 of the biggest local banks as its clients, and it posted US$ 22 million in revenues in 2012. Senior Solutions has made five acquisitions in the past six years, yet the IT firm says it will use the money raised in the stock market to acquire more companies in Brazil and abroad.
The technology company did not clarify whether it is serving any foreign client. But analysts say every IT company in Brazil is scouting for a foreign client in an attempt to grow their business quickly.
BRQ, another local IT company, is likely to move into the stock market sometime in 2015. Last year, the company hired more than 1,000 professionals, saying it would soon increase annual revenue to US$ 500 million. BRQ President Quadros has admitted that his company was in talks with some firms for acquisition.
“These are the good developments in the Brazilian IT industry. Earlier, only a few big IT companies considered raising funds on the stock market. Those two IPOs (Linx and Senior Solutions) are the proof of maturity in the IT segment,” said Mariana Carvalho, an IT analyst at Complex Technology, a local consulting firm.